Senate Majority Leader Harry Reid said late in the day that members of Congress have made little progress in negotiating the terms necessary to avoid triggering a slew of year-end tax increases and spending cuts. Reid's comment sparked a late-day sell-off, after stocks spent most of the day bouncing around the breakeven line.

Three reports painted a picture of a healthy U.S. economy. The Case-Shiller 20-city index showed that home prices jumped 3.6% in the third quarter, the biggest increase since the second quarter of 2010. Analysts had predicted a 3.1% increase.

The Conference Board released a better-than-expected reading on consumer confidence in November, a good sign ahead of the holiday shopping season. And while new orders for durable goods, including transportation, were flat in October excluding transportation, new orders rose 1.5%, according to a U.S. Census Bureau.

Still, Europe's woes continue to weigh on the United States. The Organization for Economic Cooperation and Development warned early Tuesday that Europe's worsening economy next year will slow U.S. growth more than previously forecast.

Late Monday, eurozone finance ministers and the International Monetary Fund reached an agreement that moves Greece closer to receiving a massive bailout payment. The deal includes lower interest rates for Greece, a debt buyback, and more time for the debt-laden country to repay its rescue loans.

European markets closed higher, with Britain's FTSE 100 up 0.2%, and Germany's DAX up 0.6%. France's CAC 40 was flat.

Companies: Packaged food maker ConAgra(CAG) announced that it reached a deal to buy Ralcorp(RAH), the largest U.S. manufacturer of private label food, for $90 a share in cash -- a 28% premium from Monday's closing price.

Shares of Facebook(FB) moved up 1% Tuesday after rising more than 8% Monday following the stock's upgrade by several analysts. Facebook has rallied nearly 50% since touching a low of $17.55 in early September. The stock, currently around $26, is trading at its highest level since late July.

Shares of Green Mountain Coffee Roasters(GMCR) soared more than 20% in after-hours trading after the K-cup maker reported a sharp jump in third-quarter revenue and profit.

Hewlett-Packard(HPQ), still reeling from its $8.8 billion writedown tied to its $11 billion buyout of software firm Autonomy, dragged down the Dow, dropping more than 3%. HP is now facing lawsuits from investors related to the acquisition.

Currencies and commodities: The dollar gained against the euro and the Japanese yen but was flat against the British pound.

Oil for January delivery slipped 56 cents to $87.18a barrel.

Gold futures for December deliveryfell $7.30 to $1,742.30 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury moved higher, pushing the yield down to 1.64% from 1.66%.